On the eve of the Finnish crash, in early 1990, Rolf Johansson, then working as a press attaché for the government in Helsinki, was showing around an invited group of Irish journalists and taking great pride in the Finnish economic miracle.

For several years through the 1980s the Finnish economy boomed as its timber and paper industries generated record exports and affluence. The country of 5.2 million people had even reversed a sorry history of losing its young people to Sweden.

"Six months after that trip the economy crashed," recalls Johansson, who two years ago arrived as counsellor at the Finnish Embassy on St Stephen's Green. The diplomat has therefore remarkable insights into the banking implosion and the economic crises both in his home country and here.

Until Ireland's crash, Finland's economic woes – and recovery – in the 1990s were the most widely studied.

Arrogance

Johansson says he recognised the same attitudes in Dublin when he arrived two years ago as those he saw in Helsinki in early 1990 – the supreme confidence that the economic bad times could never return. "It was arrogance," he says bluntly. "We were the Japan of Europe. Our model was the best. It was unusual not to take banking loans. Capital flows were easy to come by. People were encouraged to borrow because they thought the good times would go on forever. There was a liberalisation of capital and banks. There were quite a few major banks – six major banks – and local banks in the late '80s. Then the banks collapsed."

Other Nordic countries experienced property price bubbles but none were as severe as Finland's. The countdown to crisis was similar – there was an external shock – though not exactly like our own. "First in 1990 we had 20% trade with the Soviet Union. It was trade by barter for Russian oil. So, the prices of shoe exports would be set for five years, without having to think too much about exchange rates. And when the bubble burst people were caught in a double trap. Unemployment went to 20%."

What happened next? "In 1991 and 1992 there were quite a lot of bankruptcies," says Johansson. The historic grand coalition between the Social Democrats and the Conservatives that had ruled since 1987 was replaced after the 1991 elections, for the first time, by a centre-right government. In time, the government made a decision to form a bad bank, Arsenal Ltd, like the National Asset Management Agency (Nama). But it could buy up property loans and mortgage and business loans.

All the time the annual budget deficits were "enormous". A series of budgets and spending cuts followed. The new centre-right coalition over the next four years took tough decisions that some described as brutal.

The greatest pain was suffered by skilled workers who lost their jobs in middle age, never to work again. "You still see the scars in working-class districts in Helsinki," Johansson says.

Social budgets were cut. "We had bread queues in Helsinki and some of the bigger cities. It was very embarrassing. For people who were unemployed it was very tough because [the jobless rate] went from 5% to 20%."

Johansson, a former journalist, says that there were some but not many strikes but at the height of the crisis as unions struck agreements with government. Finland, at heart, is a "consensual Nordic country". An early retirement scheme was introduced to allow staff to leave both private and public companies at 57. "The sharpest cuts, from memory, were in 1992 and 1993. In late 1994 we had a recovery in GDP," he says. But unemployment continued at high levels into the late 1990s before rapidly falling.

Deep mark

Taxes – already high – rose even more. The recession in Finland left a deep mark. "Finns are now very crisis-conscious. You hear in now because of the recent recession that what happened in the 1990s should not be let happen again," says Johansson. Finland has not escaped the current global recession – the Metalworkers Union signed an agreement for low pay increases this year.

Finland, like Ireland, has an open, export-driven economy and fears continue that its traditional paper, timber- processing and metal industries will move to China.

Were there any positives to come out of Finland's recession? "The emergence of Nokia," he says. When Johansson was growing up, Nokia was a logo on rubber boots and rubber cables. The company transformed itself into the mobile phone giant in the mid-1990s.

"Ireland is still in 1992" on the Finnish crisis timeline, Johansson believes. "There will be a recovery in Ireland next year. You have a young and educated people. The problem for the Irish is the personal debt, particularly in housing."

Finland's fall

The Finnish economic and banking slump bears remarkable similarities to that of Ireland – although the slump here is about 50% more severe. On the eve of the crash, Finland's economy was growing by as much as 5%. In the early 1990s, GDP fell by 2%, 4% and 6% before growth returned in 1994. From 1995, the economy grew by 4% a year – but without jobs growth, unemployment surged to 20%, and stayed above 10% for 10 years. Unemployment never fell back to pre-1990 boom levels.

House prices, which had doubled in a decade, fell back to 1980 levels and did not match 1990 boom prices until 2007. Bank-loan growth took about 15 years to recover to 1990 levels. The Finnish banks continued to write off loans throughout the 1990s – reaching a peak of 3% of all loans in 1992 – but became profitable again in 1996. Banks were merged. Share prices jumped after falling for the first four years.